Businessweek Archives

Managing Tragedy At Valujet

June 02, 1996

News: Analysis & Commentary: CRISES

MANAGING TRAGEDY AT VALUJET

Grieving families came first, then a probe and panicky investors

ValuJet President Lewis Jordan had arranged a special company event: He and 27 employees were to construct a Habitat for Humanity home in Atlanta beginning on May 11. The idea was to build teamwork while solidifying ValuJet Airlines Inc.'s links to the city. As Jordan was tacking in insulation at about 2:30 that day, the pager on Public Relations Director Marcia Scott's waist trilled. Calling back, Scott turned white: A ValuJet plane in Florida had dropped off radar. Scott didn't speak, but Jordan looked at her and recognized trouble. "We'd better go," he said, and strode to his car still wearing his nail apron.

Plane crashes create dreadful, vivid memories. And this one offered a haunting image: the mucky, black crater in the Everglades with no tail or fuselage in sight. It was Jordan's job to salvage something from the disaster, in which 110 people died. Jordan, an industry veteran who co-founded ValuJet three years ago with three partners, had no experience with a crisis of such magnitude and intensity. But he and his colleagues have been working around the clock to handle government inquiries and press criticism. Now, they are focused on an equally tough project: shaping a future for a shattered airline.

CARETAKING. When he reached ValuJet's offices near its operations base at Atlanta's Hartsfield International Airport on May 11, Jordan immediately dispatched a ValuJet team to Miami. He stayed behind to orchestrate caretaking for victims' families. One of his first calls was from McDonnell Douglas Corp. President Harry C. Stonecipher, offering condolences and sending teams to aid the investigation and safety inspections of ValuJet's fleet, composed entirely of McDonnell Douglas-made DC-9 and MD-80 aircraft averaging 26.4 years old.

In Miami, where Jordan arrived after 3 a.m. on May 12, ValuJet flew in specially trained employees from around the country, assigning one to each family to help them grieve, arrange housing, and inform them of any developments. Later, the counselors would organize a tour of the crash site.

The next day, back in Atlanta, a weary Jordan began dealing with the business impact of the tragedy. ValuJet's stock closed down 23% on the first day of trading after the crash. And on May 15, the Federal Aviation Administration, criticized in Washington for lax oversight, announced an unprecedented plan to inspect every ValuJet plane and fly inspectors on every route.

Customers did not immediately abandon ValuJet. Fewer than 10% canceled reservations after the crash. But by May 16, ValuJet's schedule was a shambles as every plane underwent detailed inspection and maintenance. Jordan canceled half of ValuJet's flights indefinitely. And he phoned USAir President and Chief Operating Officer Rakesh Gangwal and asked him to accept ValuJet passengers who were knocked off canceled flights. "Whatever we can do to help," Gangwal told him. The chief executive of another carrier--Jordan won't say who--turned down the same request.

A week after the crash, the action had migrated from the command center to executives' offices. Marketing Director Ponder Harrison, who had pulled ValuJet's advertisements off the radio after the crash, began mapping out a postcrash strategy. ValuJet will stick with its "Critter" logo and the "good times, great fares" motto, but like most airlines, it probably will shy away from the safety issue in marketing plans.

"STAYING POWER." Meanwhile, Chief Financial Officer Stephen C. Nevin and CEO Robert Priddy reached out to shareholders, bondholders, and lenders. Priddy assured analysts in a May 22 conference call that ValuJet's insurance will cover the accident's costs. And its $254 million in cash, he said, "gives us considerable staying power" even if traffic does not bounce back.

Jordan believes passengers eventually will return to ValuJet. "A lot of people told us in 1993 that we wouldn't make it, but we did. It was tough, but we made it, and we'll make it through this." One event that may take some heat off ValuJet: SabreTech Inc., the company that supplied oxygen tanks to Flight 592 that may have led to the crash, said on May 21 that it had mislabeled the cargo.

Still, ValuJet isn't expected to resume a full schedule until the fourth quarter. For now, Jordan takes strength from a message that ValuJet pilot Dusty Rhodes left on his voice mail one night: "Tough times don't last, tough people do." That may be so. But for ValuJet, recovering promises to be a long, slow ordeal.By David Greising in Atlanta